November 29, 2013

Click here for Jesse’s Cafe Americain interesting graphic. Not only does it show the limited companies/items that control food and necessities, it shows you why there is alot of money in keeping sugar and chemicals cheap and the sheeple sick and diseased. The sugary food choices make you sick and the healthcare systems and big pharma makes you “well”. But you could avoid the whole cycle, save money, and save time and health by just not eating and buying these items.

Groovygirl just finished Jim Rogers latest book Street Smarts (she got it at the library). She highly recommends it!! Very good. Remember that Jim is a long-term investor. He is always early, and he admits it. There are several fundamental investing practical points worth reading. But pay attention, they are sprinkled throughout the story-telling.

Jim on China’s announcement last week:

10:15 China’s Plenum –
“the Chinese are becoming more and more capitalist”… they are
becoming more and more market focused… as opposed to the US where when
there is a problem “the government decides how to fix it… look at
Obamacare” – “the government says “we will figure out the
solution”… “I much prefer the Chinese system of open markets than the
US with the government dictating everything”

Side musing: make sure you watch the entire Boom-Bust show after Jim Rogers. They discuss very important US housing data regarding foreclosures that in gg’s mind supports Martin Armstrong’s real estate cycle (slight uptick through 2015 and then decline). Housing bubble popped in certain areas and then moved toward the center of the US (takes about 18 months to 3 years for that move). The rise in foreclosures in bubble areas lately signal a renewed decline.

They also discuss two important points. The go-between in the housing market doesn’t have the incentive or know-how to do things in the best interested of the homeowner and the investor. Very important! Until this is fixed, we will continue to have long-term problems in housing, regardless of the huge derivative issue that was not covered in this segment. The mortgage forgiveness act is going to expire at the end of the year. That means that homeowners who have their loans reduced (forgiven) must pay regular earned income tax on the forgiven amount. That’s huge. If someone can’t pay their mortgage, they certainly can’t pay the tax. They will have to walk away. Walking away means empty houses, no income for investors, and continued overall depressed housing prices once the banks put them up for sale. More negative feedback loops in US housing and real estate markets.

Also, pay close attention to that regular earned income tax on debt forgiveness. It will come up again when the student debt bubble pops. First of all, debt is NOT income, so it should not have a regular earned income tax on it. And since the debt is not paid and will never be paid, I don’t know how anyone can call it income in the first place. The IRS is trying to get some money as they are losing money hand over fist because businesses, banks, and investors can write off their losses (the debt they loaned out for housing) as tax deductible. It is another example of corporations (since they are considered people now) having more “individual rights” than actual individuals.

Government policy determines what people and business will do, either by carrot, stick, or indifference. Jim’s interview was a great illustration about how that works well (in China) and is not working well in, say, the US.

November 24, 2013

November 23, 2013

Click here. Elizabeth Warren is speaking the truth again. Don’t know what that will get us, but it’s refreshing to hear from a politician. Elizabeth speaks on the House Floor about the Retirement crisis.

Groovygirl gets newsletters from Robert Kiyosaki (Rich Dad) in her email box occasionally. One came in today that had an article explaining stock indexes that some readers may not be aware of. Click here and scroll down to page 3 to the article Equality for Everyone?

I know that people either love or hate Rich Dad. He usually has some good info and groovygirl likes him because he teaches you to think, not what to do. Groovygirl learned more about accounting from his first book Rich Dad Poor Dad than from any accounting class she took. And every accredited investor that she has sat down with, they all say the same types of things about investing that Rich Dad says, just not necessarily in the same way. So, if you don’t have access to a successful accredited investor as a mentor, Rich Dad’s books are a good starting point.

There was also a very good interview with Jim Rogers on Rich Dad’s radio show (about 40 minutes long). The link is in the newsletter link above.

Groovygirl looks at the spread between the real inflation rate, right now running around 8.5%, and the rates you can earn at the bank. Those are currently running better than recent months around 2%. Whoo-hoo! This gives a good idea about how far behind real people are falling. Someone living off of investments alone would have a hard time finding a consistant 8.5% return after taxes. (Maybe real estate cash flow) If you compare a business/company’s annual gain and the real inflation stats, it will give you a quick look to see if they are falling behind too. Business annual reports are more complicated, but it directs you to which businesses to investigate further. You can do this with tax revenue for states, counties, and cities, etc. If they are not bringing in at least 8.5% more, then they have to cut somewhere at some point.

Easy money and credit have hidden these truths since the dollar began to really fall in 2001. Once liquidity evaporates for good, it is all over. We have experienced liquidity evaporating twice in the last decade and numerous examples from other countries in the last 5 years. We know what happens. It should not be a surprise when it happens again and you have no excuse not to be prepared.

Chart of the Day is an updated inflation-adjusted DOW chart. We keep hitting that resistance level. Click here.

Groovygirl knows that everyone is excited about the stock market and “new highs”, but this chart of the day shows:

A clear winter cycle since around 2000 or the dot.com bust

A firm resistance level at around $15,000 (inflation-adjusted)

After taxes, you may have not made back your losses, even if you entered the market perfectly timed. Taxes are very important to consider in these times.

There were major swings in the stock market during the Great Depression as well. This is not unusual.

We are really in the middle of the long-term trading channel. We could go up, we could go down…..

The recent drops in this winter cycle were driven by bubbles popping and terrorist events. (dot.com pop, 9-11, and housing bubble pop) During a winter cycle, the market is very sensitive to outside forces. Confidence is easily and quickly lost and then regained. This is why buy and hold is not a good long-term strategy during a winter cycle. Groovygirl is not saying that you can’t make money during a winter cycle, it just isn’t the best time for a buy and hold pattern.